THE government has made the right decision to reopen the proposed investments in renewable energy that had been blocked last March. The renewable energy policy framework is in a state of flux at the moment as the new policy is being discussed among various stakeholders. There will undoubtedly be some level of discontentment within the renewable energy industry in Pakistan at the caveats in the decision, such as making those whose tariff determinations are more than a year old return to the regulator for fresh tariffs, which will doubtless be substantially reduced. Given the speed with which renewable energy tariffs are dropping worldwide, a system run by a single tariff-setting body like Nepra will struggle to keep pace. This is creating malignant incentives in some cases, where those who got in the door early have locked in very high tariffs competitive with thermal power for the next 25 years, while those left out have to see their tariffs being whittled down as time passes. This naturally creates unhappiness at the sheer disparity between the returns being made by different parties.

To really ignite the renewable revolution in Pakistan, the government needs to reconsider the model of setting upfront tariffs in the first place and, instead, move towards a market-based pricing regime. On top of that, we need to move away from the model of large utility-scale projects and build the right structure of incentives to promote point-of-consumption generation for solar power — which basically means having solar rooftop panels, and encouraging people to invest in them. Simply tweaking the tariffs will only garner more wrangling among industry players as prices around the world continue to fall rapidly. This means a near-complete rethink of the private power policy under which all power generation has been contracted in this country for almost a quarter of a century now, and which has opened the doors to large-scale abuse and rent-seeking behaviour within the power sector. This government campaigned on the promise of change, particularly big change of the transformative type. In the power sector, it has a clear opportunity and mandate to work towards this objective. A surplus in power generation means there is a few years’ gap in which to put in the plans, and the list of private investors ready to enter is quite long. The solar moment is now, will the government seize it?

Published in Dawn, March 1st, 2019